1 Prepare a job-order cost sheet for the proposed job. What is the expected per-unit cost?

Should Nutratask accept the price offered by the prospective customer? Why or why not?

Job-Order Cost Sheet

Potassium Aspartate
Materials Direct Labour
Type Quantity Cost/ unit Amount Hours Rate
Aspartic acid 195 5.75 $ 1,121.25 16 $ 12.50
Citric acid 15 2.02 30.30
K2CO3 (50%) 121.5 4.64 563.76
Rice 30 0.43 12.90
Total $ 1,728

Cost Summary :
Direct Material $ 1,728.21
Direct Labour 200.00
Overhead 220.00
Total Cost $ 2,148.21
Order required (300 kg) 300.00
Expexted Cost per unit $ 7.16
Price per unit 30% $ 9.31

The Price offered by the customer $ 8.80

Nutratask should not accept the price offered by the customer because it is
lower than the price per unit that aassigned by Nutratask. If the Nutratask
accepts the offering then the gross profit will be decrease.

2 Suppose Nutratask and the prospective customer agree on a price of cost plus 30 percent.
What is the gross profit that Nutratask expects to earn on the job?

Price per unit 30% $ 9.31

Revenue 300 $ 2,792.67
Cost of goods sold 2,148.21
Gross profit $ 644.46

3 What is the actual per-unit cost? The bid price is based on expected costs. How much did
Nutratask gain (or lose) because of the actual costs differing from the expected costs?
Suggest some possible reasons why the actual costs differed from the projected costs.

Actual per unit cost :

Direct Material $ 1,790.00
Direct Labour 225.00
Overhead 247.50
 Total Cost $ 2,262.50
Order required (300 kg) 300.00
Actual Cost per unit $ 7.54
Price per unit 30% $ 9.80

Gain (lose) :
Total expected cost $ 2,148.21
Total actual cost $ 2,262.50
Lose $ -114.29
Unfavorable

Some possible reasons :

- The labour may have been inefficient
- Inefficient and possibly wasteful use of materials
- Increasing in overhead cost or materials cost caused by uncertainty event

Assume that the customer had agreed to pay actual manufacturing costs plus 30
percent. Suppose the actual costs are as described in Requirement 3 with one
addition: an underapplied overhead variance is allocated to Cost of Goods Sold
and spread across all jobs sold in proportion to their total cost (unadjusted cost
of goods sold). Assume that the underapplied overhead cost added to the job in
4 question is $30. Upon seeing the addition of the underapplied overhead in the
itemized bill, the customer calls and complains about having to pay for
Nutratask’s inefficient use of overhead costs. If you were assigned to deal with
this customer, what kind of response would you prepare? How would you
explain and justify the addition of the underapplied overhead cost to the
customer’s bill?

The customer's bill :

Direct Material $ 1,790.00
Direct Labour 225.00
Direct Labour 247.50
An underapplied overhead 30.00
Total cost $ 2,292.50
Total price 30% $ 2,980.25

We could explain to the customer that the addition of an underapplied overhead

is adjustment required for the actual cost and the production cost is controlled
by the overhead cost. If the customer still not satisfied, Nutratask could consider
to use the previous cost althought the gross profit is not maximum. This action is
a company's responsibility in providing services and maintaining customer trust.
irect Labour Overhead
Amount Cost Rate Amount
$ 200 $ 200 110% $ 220

$ 200.00 $ 220.00